1. Concepts in Enterprise Resource Planning Third Edition Chapter Seven Process Modeling, Process Improvement, and ERP Implementation

2. Concepts in Enterprise Resource Planning, Third Edition2 2 Objectives After completing this chapter, you will be able to: Use basic flowcharting techniques to map a business process Develop an event process chain (EPC) diagram of a basic business process Evaluate the value added by each step in a business process Develop process improvement suggestions Discuss the key issues in managing an ERP implementation project Describe some of the key tools used in managing an ERP implementation project

3. Concepts in Enterprise Resource Planning, Third Edition3 Introduction Tools that can be used to describe business processes –Flowcharts, event process chains –Not specific to ERP –Can help managers identify process elements that can be improved Role of process-modeling tools in ERP implementation projects

4. Concepts in Enterprise Resource Planning, Third Edition4 Process Modeling Business processes can be quite complex Process model: any abstract representation of a process Process-modeling tools provide a way to describe a business process so that all participants can understand the process Advantages of process models –Graphical representations are usually easier to understand than written descriptions –Provide a good starting point for analyzing a process Participants can design and implement improvements –Document the business process Easier to train employees to support the business process

5. Concepts in Enterprise Resource Planning, Third Edition5 Flowcharting Process Models Flowchart –Any graphical representation of the movement or flow of concrete or abstract items –Clear, graphical representation of a process from beginning to end –Uses a standardized set of symbols Process mapping –Often used interchangeably with flowcharting –Specifically refers to activities occurring within an existing business process

6. Concepts in Enterprise Resource Planning, Third Edition6 Flowcharting Process Models (cont’d.) Figure 7-1 Basic flowcharting symbols

7. Concepts in Enterprise Resource Planning, Third Edition7 Fitter Snacker Expense Report Process Maria, Fitter Snacker salesperson –Completes a paper expense report after travel –Makes a copy for her records –Attaches receipts for any expenses over $25 –Mails it to her zone manager at the branch office Kevin, zone manager –Reviews expense report –Approves report or mails it back to Maria asking for explanation, verification, or modification –After approval, mails it to corporate office Process at corporate office –Accounts payable (A/P) clerk

8. Concepts in Enterprise Resource Planning, Third Edition8 Figure 7-2 Partial process map for Fitter Snacker expense-reporting process

9. Concepts in Enterprise Resource Planning, Third Edition9 Process Boundaries Process boundaries define: –Which activities are to be included in the process –Which activities are considered part of environment—external to process All processes should have only one beginning point and one ending point Decision diamond asks a question that can be answered with “yes” or “no”

10. Concepts in Enterprise Resource Planning, Third Edition10 Extensions of Process Mapping Hierarchical modeling: ability to flexibly describe a business process in greater or less detail, depending on the task at hand Modeling software that supports hierarchical modeling –Provides user the flexibility to move easily from higher-level, less detailed views to the lower-level, more detailed views

11. Concepts in Enterprise Resource Planning, Third Edition11 Figure 7-3 Hierarchical modeling

12. Concepts in Enterprise Resource Planning, Third Edition12 Extensions of Process Mapping (cont’d.) Deployment flowcharting –Swimlane flowchart –Depicts team members across the top –Each step is aligned vertically under the appropriate employee or team –Clearly identifies each person’s tasks in the process

13. Concepts in Enterprise Resource Planning, Third Edition13 Figure 7-4 Deployment, or swimlane, flowcharting of the FS expense report process

14. Concepts in Enterprise Resource Planning, Third Edition14 Event Process Chain (EPC) Diagrams Event process chain (EPC) format –Uses only two symbols to represent a business process –Matches the logic and structure of SAP’s ERP software design –Two structures: events and functions Events: a state or status in the process Functions: part of the process where change occurs

15. Concepts in Enterprise Resource Planning, Third Edition15 Event Process Chain (EPC) Diagrams (cont’d.) Figure 7-5 EPC components

16. Concepts in Enterprise Resource Planning, Third Edition16 Event Process Chain (EPC) Diagrams (cont’d.) EPC software –Enforces an event-function-event structure –Standardized naming convention for functions and events Three types of branching connectors –AND –OR –Exclusive OR (XOR) Basic EPC diagram can be augmented with additional information

17. Concepts in Enterprise Resource Planning, Third Edition17 Figure 7-6 Basic EPC layoutFigure 7-7 OR connector

18. Concepts in Enterprise Resource Planning, Third Edition18 Event Process Chain (EPC) Diagrams (cont’d.) Figure 7-8 AND connectorFigure 7-9 XOR connector

19. Concepts in Enterprise Resource Planning, Third Edition19 Figure 7-13 EPC diagram with organizational and data elements

20. Concepts in Enterprise Resource Planning, Third Edition20 Process Improvement Value analysis –Each activity in the process is analyzed for the value it adds to the product or service –Value added is determined from the perspective of customer –Real value: value for which the customer is willing to pay –Business value: value that helps the company run its business –No value: an activity that should be eliminated

21. Concepts in Enterprise Resource Planning, Third Edition21 Evaluating Process Improvement Disrupting the current process to make changes can be costly and time consuming Dynamic process modeling takes a basic process flowchart and puts it into motion –Uses computer simulation techniques to facilitate the evaluation of proposed process changes Computer simulation –Uses repeated generation of random variables that interact with a logical model of the process –Predict performance of the actual system

22. Concepts in Enterprise Resource Planning, Third Edition22 ERP Workflow Tools Workflow tools –Software programs that automate the execution of business processes and address all aspects of a process, including: Process flow (logical steps in the business process) People involved (the organization) Effects (the process information) ERP software provides a workflow management system –Supports and speeds up business processes Workflow tasks: links that can include basic information, notes, documents, and direct links to business transactions SAP system can: –Monitor workflow tasks –If the tasks are not completed on time, can automatically take various actions

23. Concepts in Enterprise Resource Planning, Third Edition23 Figure 7-14 SAP ERP Workflow Builder screen

24. Concepts in Enterprise Resource Planning, Third Edition24 Figure 7-16 Manager’s Business Workplace with workflow task

25. Concepts in Enterprise Resource Planning, Third Edition25 ERP Workflow Tools (cont’d.) Workflow provides a number of useful features –Employees can track progress of workflow tasks –System can be programmed to send reminders to employee(s) responsible for a task –For sporadic processes, workflow tools are a powerful way to improve process efficiency and effectiveness

26. Concepts in Enterprise Resource Planning, Third Edition26 Implementing ERP Systems Late 1990s: many firms rushed to implement ERP systems to avoid the Y2K problem Since 2000: pace of implementations has slowed considerably –Most Fortune 500 firms have implemented an ERP system –Current growth is in the small to midsized business market Implementation of ERP is an ongoing process

27. Concepts in Enterprise Resource Planning, Third Edition27 ERP System Costs and Benefits ERP implementation is expensive –Usually ranging between $10 million and $500 million, depending on company size Costs of ERP implementation –Software licensing fees –Consulting fees –Project team member time –Employee training –Productivity losses

28. Concepts in Enterprise Resource Planning, Third Edition28 ERP System Costs and Benefits (cont’d.) Companies must identify a significant financial benefit that will be generated by ERP system Only way companies can save money with ERP systems is by using them to support more efficient and effective business processes Companies must manage transfer of data from old computer systems to new ERP system

29. Concepts in Enterprise Resource Planning, Third Edition29 Implementation and Change Management Key challenge is not in managing technology, but in managing people ERP system changes how people work –To be effective, change may have to be dramatic –Business processes that are more effective require fewer people –Some employees may be eliminated from their current jobs

30. Concepts in Enterprise Resource Planning, Third Edition30 Implementation and Change Management (cont’d.) Organizational change management (OCM): managing the human behavior aspects of organizational change People do not mind change, they mind being changed If ERP implementation is a project that is being forced on employees, they will resist it When employees have contributed to a process change, they have a sense of ownership and will likely support the change

31. Concepts in Enterprise Resource Planning, Third Edition31 Implementation Tools Many tools are available to help manage implementation projects –Example: process mapping SAP provides Solution Manager tool –Helps companies manage implementation of SAP ERP In Solution Manager, ERP implementation project is presented in a five-phase Implementation Roadmap: –Project Preparation (15 to 20 days) –Business Blueprint (25 to 40 days) –Realization (55 to 80 days) –Final Preparation (35 to 55 days) –Go Live and Support (20 to 24 days)

32. Concepts in Enterprise Resource Planning, Third Edition32 Figure 7-17 Implementation Roadmap in Solution Manager

33. Concepts in Enterprise Resource Planning, Third Edition33 Implementation Tools (cont’d.) Project Preparation –Organizing technical team –Defining system landscape –Selecting hardware and database vendors –Defining project’s scope Business Blueprint –Produces detailed documentation of business process requirements of the company

34. Concepts in Enterprise Resource Planning, Third Edition34 Implementation Tools (cont’d.) Realization –Project team members work with consultants to configure the ERP software in development system Final Preparation –Testing the system throughput for critical business processes –Setting up help desk for end-users –Setting up operation of the Production (PROD) system and transferring data from legacy systems –Conducting end-user training –Setting Go Live date

35. Concepts in Enterprise Resource Planning, Third Edition35 Implementation Tools (cont’d.) Go Live and Support –Company begins using new ERP system –Monitoring of system is critical so that changes can be made quickly if performance of the system is not satisfactory –Important to set a date at which the project will be complete

36. Concepts in Enterprise Resource Planning, Third Edition36 System Landscape Concept SAP recommends a system landscape for implementation –Three completely separate SAP systems: Development (DEV) Quality Assurance (QAS) Production (PROD) –Transport directory: special data file location on DEV server

37. Concepts in Enterprise Resource Planning, Third Edition37 System Landscape Concept (cont’d.) Figure 7-18 System landscape for SAP ERP implementation

38. Concepts in Enterprise Resource Planning, Third Edition38 System Landscape Concept (cont’d.) Development (DEV) system used to develop configuration settings and special enhancements using ABAP code Changes recorded in transport directory Changes imported into QAS system QAS system: changes are tested All settings, programs, and changes that pass testing are transported to PROD system PROD system: used by company to run its business processes

39. Concepts in Enterprise Resource Planning, Third Edition39 Summary Business processes –ERP systems are designed to provide the information, analysis tools, and communication abilities to support efficient and effective business processes –Process modeling: fundamental tool in understanding and analyzing business processes Process mapping: process-modeling tool that uses graphical symbols to document business processes SAP’s Solution Manager: set of tools and information that can be used to guide an implementation project Included in SAP ERP to help manage the implementation of ERP software SAP’s system landscape was introduced to show how changes to ERP system during implementation (and beyond) are managed